If the RBA Increases the Money Supply at the Same

question 36

Multiple Choice

If the RBA increases the money supply at the same time the government increases government spending, the severity of the crowding- out effect:

• A) will be increased
• B) could either increase or decrease depending on the sensitivity of planned investment to the interest rate
• C) will be reduced
• D) will not be affected

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Definitions:

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, often with dividend payment preference.

Deductible Corporate Expense

Expenses that a corporation can subtract from its gross income to reduce its taxable income, according to tax laws.

Stock Dividend

A dividend payment made by a company to its shareholders in the form of additional shares rather than a cash payout.

Total Assets

The sum of all assets owned by a company, including both current and non-current assets.